Forex Investment and Currency Trading

Nothing too exciting with mostly month, quarter, fiscal year end activity dominating market movement. Euro-zone inflation jumped to record highs, IP in Japan continued to fall taking the Nikkei with it down 2.3% on close of Japanese fiscal year.

JPY  - It was all about the fixing. Closed soft in New York on Friday, continuing into the Sydney open, dipping below 98.85 before Japanese fixing demand drove it 140 points to print 100.16. Exporters were at the ready once again above 100 and things are now just a tiny bit higher than where we left them on Friday. Topside offers are expected to remain in place although [...]

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USD
The more benign risk environment led to some stabilization in the USD towards the end of the week, but further deterioration in US economic data underscored the recessionary forces that are building in the economy. The broad USD index continues to trade just off recent lows and the argument for further US strength is hardly compelling. ISM Manufacturing, Non-farm Payrolls and Bernanke’s testimony to the Joint economics committee will be important drivers for the dollar in the week ahead and should be watched carefully.
EUR/USD
EUR/USD has continued its move higher this morning after its biggest one week gain [...]

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Incoming data suggest that the Eurozone is currently divided between a resilient North, with Germany and to a lesser extent France still enjoying decent cyclical conditions, and a struggling South, with Italy and Spain drifting into sub-potential growth rates. However, on balance, economic activity in the Eurozone remains sufficiently strong to help the hawks at the ECB to resist calls for rate cuts, at a moment when inflation continues to accelerate.  The probability is raised that the ECB may not cut at all this summer from 35% to 40%.
The hawks within the ECB Governing Council have spent a rewarding week: their [...]

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In the US, the opening of the discount window to primary dealers (Primary Dealer Credit Facility or PDCF) and the introduction of the Term Securities Lending Facility (TSLF) that accepted private-label mortgage collateral seemed to moderate the flight-to-quality bid over the Easter holiday and the Treasury curve bear flattened. Although the first TSLF auction had a low bid-to-cover of 1.15, the $37bn of loans outstanding from the PDCF indicate that liquidity needs remain, especially entering quarter end.
In addition, once the market makes it past quarter end, it will likely face a second consecutive significant decline in payrolls—currently forecast is a decline [...]

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